Polymetal (LSE:POLY) shares tanked when Russia invaded Ukraine in 2022. The gold mining stock has operations in Russia and Kazakhstan, and the former has just been hit by US sanctions — if business wasn’t tough enough already.
So what’s been going on with the share price, and what’s next for this gold miner?
A year of headwinds
Early on in the war, Polymetal highlighted challenges relating to funding as a result of sanctions placed on Russian banks — buyers of gold — and the state as a whole. At that point, the miner had not been sanctioned itself, but shares were trading for a fraction of where they had been pre-war.
A year ago, I knew of several investors who looked at this discounted stock and bought it. But if I’d invested £1,000 in the stock a year ago, today I’d have £790. That’s clearly not a good return on an investment.
It’s also worth highlighting that Polymetal stopped its dividend after the war — so I wouldn’t have received any dividends. Unfortunately for me, I owned Polymetal before the war.
Is there any upside?
Polymetal is a challenging company to value right now. For the year year ended 31 December, the gold miner reported a surge in operating costs due to the sanctions against Russia. Profits dropped and cash flow turned negative.
However, Polymetal noted that “disruption was largely eliminated in Q4 2022”, indicating that 2023 would likely be a better year, adding “the resumption of free cash flows and a reduction in net debt over the course of the coming year“.
It’s also worth noting that the Kazakh business is not impacted by the recent US sanctions. In 2022, its operations in Kazakhstan delivered around 500,000 oz of gold, versus 1.2m oz in Russia.
Shareholders have been hit with more uncertainty. Polymetal plans to leave the London Stock Exchange on 17 July — subject to a shareholder vote next week. The Anglo-Russian gold and silver producer plans to move its primary listing to the Astana Stock Exchange (AIX).
This could be a challenge. That’s because if I still owned the shares, it wouldn’t be easy for me to access them — buying or selling — on the AIX. Unsurprisingly, my brokerage doesn’t provide me with access to Kazakh-listed stocks.
I’d suggest that Polymetal could be undervalued, but that’s very hard to accurately assess right now. But the guidance is positive and, as mentioned, around 30% of its operations are not impacted by sanctions.
However, I’m not sure it’s worth the risk or the hassle. Assuming the delisting goes ahead, I’d have to find a broker to allow me to trade these stocks, and there’s always the risk that things could get worse. Maybe Moscow will nationalise the company — I wouldn’t bet against it as the war drags on.